Working Capital Financing and Corporate Profitability of Pakistan Manufacturing Firms : Evidence from FMCG, Cement & Chemical Sector

The aim of conducting research is to explore the dynamic relation of working capital financing with respect to profitability of the firm & for that purpose data has been gathered from three different sectors i.e. chemical, cement & FMCG. For analyzing the results panel least square method has been employed for which stationarity level of data series has been checked through panel unit root test & results shows data series were non-stationary on level 1 but it has been stationary on 1st difference. This study is also among very few of the researches which uses quadratic model and panel regression models to verify the results. Additionally, this study explore the working capital management effect on profitability along with liquidity and short-term obligation as a measure of working capital management through considering specifically manufacturing sector by using the fixed/random effect regression model, on which no previous research has been done. Finding indicate that there is an insignificant but negative relationship between Return on assets (ROA) and all the control variables of working capital except current assets and sales in pooled regression model and current assets & debt ratio in fixed/random effect model. In brief, study suggests that profitability of firm is not dependent on investment in working capital of chemical, cement and consumer sectors of Pakistan